Strong home sales and continued growth in house prices are spurring purchase activity, while refinances are surging thanks to low interest rates, Freddie Mac reported. But this year’s strong figures are better balanced than they were in 2012.
“At the current pace, we're likely to see the mortgage market top $2 trillion in originations for the first time since 2012,” said Sean Becketti, chief economist at Freddie Mac. “And unlike in 2012, when the market was driven largely by refinances, today's market is more balanced between home refinances and purchases; nearly 50-50. This is good news for home sales as we're likely to see the best year in home sales in a decade. This is a good sign for the housing market as it continues to be an even brighter spot in the economy.
“However, the housing market still has challenges, which is reflected in our housing starts forecast. Low levels of inventory across many markets will continue to put upward pressure on house prices for the foreseeable future.”
The projection came in Freddie Mac’s monthly Outlook for August. Among other projections in this month’s Outlook were:
- GDP growth was revised down to 1.5% in 2016 and 1.9% in 2017
- Low interest rates and strong home sales are expected to push 2016 mortgage originations up by $175 billion over last month’s forecast
- Interest rates are projected to remain below 4% this year and in 2017. The 2017 mortgage rate forecast was revised down to 3.7% for the average 30-year fixed-rate mortgage and 2.1% for the 10-year Treasury yield
- Total home sales are projected to hit 6.04 million this year – the highest level in a decade
- Home construction is expected to continue on an upward trend, but at a slower pace. The housing starts forecast for 2016 and 2017 has been revised down to 1.2 million and 1.4 million, respectively
Mortgage originations are expected to top $2 trillion this year for the first time since 2012, according to new data from Freddie Mac.